PayPoint sets aside £12.5m amid Ofgem probe
The energy regulator said in September it believes PayPoint breached regulations.
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Your support makes all the difference.PayPoint has set aside £12.5 million to cover the potential fallout of an Ofgem investigation into how it allegedly used its strong position in the market to exclude competitors.
The business said it had made the provision as a “current best estimate” as it awaits a final decision from the energy regulator.
Ofgem claimed in September that between 2009 and 2018, PayPoint had dominated the market for prepayment energy customers.
When households with prepayment meters want to top up their accounts they can go to one of PayPoint’s 27,000 sites, largely in local supermarkets or newsagents.
This estimated provision is not an admission of liability in relation to Ofgem’s provisional views
Ofgem said that because PayPoint was so powerful in the market it must not use this position to impair the ability of rivals to compete.
Yet in contracts with energy suppliers and retailers the business included clauses which limited their ability to use other services. This could be in breach of the Competition Act 1998.
Ofgem has not yet issued a final decision.
“We are considering Ofgem’s provisional views … and based on the range of potential outcomes in such proceedings, we believe there will likely be a future outflow of funds in the next financial year,” PayPoint said while presenting its results for the 12 months to the end of March.
It added: “This estimated provision is not an admission of liability in relation to Ofgem’s provisional views.”
The company said that revenue from continuing operations fell 11.5% to £127.7 million in the period.
Pre-tax profit from continuing operations fell more than 61% to £19.4 million, in part due to the provisions set aside because of Ofgem.
The company said it had seen strong growth in card payments and parcels as many customers leaned heavily on online deliveries and local shops during the pandemic, and shifted away from cash.
Chief executive Nick Wiles said: “While early in the year, we are already seeing some encouraging signs of continuing renewed activity in a number of areas of our business, in particular in card processing and parcels.”
He added: “As a result, we are confident in the business delivering further progress in the year ahead as we take advantage of the accelerated growth opportunities across our key markets.”